Alberta is in no hurry on its proposal to withdraw from the Canada Pension Plan

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Pensions are a hot topic in Alberta – maybe too hot for the province to beat a hasty exit from Canada’s national plan.

Premier Jason Kenney released the report of his “Fair Deal” panel on Wednesday, and as advertised it included the idea of opting out of the Canada Pension Plan and creating a homegrown one.

The process of studying whether to proceed won’t be speedy. Of the 25 recommendations in the Fair Deal report aimed at showing the oil-producing province is tired of being pushed around by Ottawa and generally unappreciated by the rest of Canada, the Premier seems least gung-ho about this one.

The panel, led by veteran bureaucrat Oryssia Lennie, suggested this be done right away, but Mr. Kenney appears to be taking it slow. First, the province’s Finance Department will study the pros and cons of pulling out of the $570-billion CPP, consult with outside experts, then report back in 2021 on whether to go ahead. If the department recommends proceeding, the question will be put to a referendum, possibly that October.

Some of the other recommendations from the panel, such as appointing a chief firearms officer and holding a referendum on the federal equalization system, address well-established beefs and so are an easy sell among United Conservative Party voters. That is, Albertans don’t want Ottawa and urban liberals to govern their gun ownership, and are tired of paying more into federal coffers in the form of taxes than they get in return in transfers.

The pension question is much thornier, especially since April, when a multibillion-dollar loss on derivatives at Alberta Investment Management Corp. (AIMCo) raised questions within the province about the risks of putting Alberta in charge of the new provincial pension plan.

AIMCo suffered a $2.1-billion loss on a wrong-way bet on volatility when global markets took a roller-coaster ride in reaction to the COVID-19 crisis in March.

The AIMCo board launched a formal investigation into what critics have called an unacceptable level of risk for such an organization. It hired accounting firm KPMG LLP to work on uncovering what went wrong, and how to avoid it in the future. The results are expected soon.

With $119-billion in assets, AIMCo invests on behalf of public-sector pension plans as well as government accounts such as the Heritage Savings Trust Fund, the rainy-day fund derived from oil and gas revenues. Early this month, figures released by AIMCo pension clients showed that the Crown corporation also underperformed Canadian peers in stock, bond, real estate and private-equity investments.

This only heightened concerns among many Albertans who fear that their retirement benefits, if pulled from the CPP, could be jeopardized if AIMCo does not straighten out its approach to investment risk before being named manager of a new provincial pension plan.

Given the timeline set out by the Premier, it will get 16 months to improve its performance if there is any hope of garnering public support for becoming a much larger and even more important player in the Alberta economy.

However, the panel said there are options: the CPP could still manage an Alberta plan, or there could be a joint effort between the CPP and AIMCo. These ideas appear to fly in the face of seeking more autonomy, however.

Mr. Kenney explains what he sees as advantages of repatriating Albertans’ public pensions, including one that is demographic in nature. The province’s work force is younger than the national average, and therefore pays more into the CPP than it receives in pension benefits, he says. In addition, the Premier asserts, the premiums are part of an unfair tax burden in which the province is shortchanged.

However, shifting to a provincial plan would remove some of the safety afforded by the massive scale that the CPP provides, especially in times of crisis. That could be a very expensive statement to make.

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